Exchange Rate Depreciation and Inflation in Nigeria (1986 Ã¢ÂÂ 2008)B Imimole, A Enoma*
Department of Economics, Ambrose Alli University, Ekpoma, Nigeria.
- *Corresponding Author:
- Anthony Enoma
Department of Economics
Ambrose Alli University
E-mail: [email protected]
Accepted date: April 13, 2011; Published date: July 30, 2011
The research paper examined the impact of exchange rate depreciation on inflation in Nigeria for the period 1986–2008, using Auto Regressive Distributed Lag (ARDL) Cointegration Procedure. The research found that exchange rate depreciation, money supply and real gross domestic product are the main determinants of inflation in Nigeria, and that Naira depreciation is positive, and has significant long-run effect on inflation in Nigeria. This implies that exchange rate depreciation can bring about an increase in inflation rate in Nigeria. The paper also found that inflationary rate in Nigeria has a lagged cumulative effect. The research paper therefore concludes that although Naira depreciation is relevant in ensuring an improvement in the production of exportable commodities, it must not be relied upon as a potent measure for controlling inflation in Nigeria. The paper therefore recommends the need for policy-makers to employ exchange rate depreciation as a measure to compliment other macro-economic policies to stabilize the volatile inflationary rate in Nigeria.